Are Rewards Credit Cards Worth It?

Most credit cards in the market offer special incentives and benefits to customers on spending to make their experience rewarding. But are the incentives substantial enough to make it worthwhile to apply for a credit card?

These rewards are offered by the banks so that more and more people apply for credit cards in India. These best rewards credit cards can help you save a lot of your hard-earned money if used wisely. From grocery purchases to flight bookings, these reward points can pretty much help you save money on anything.

So, in this guide, we try to understand whether reward credit cards are worth it or not.

What are Rewards Credit Card?

As the name suggests, a reward credit card is a card that rewards you on your spendings.

Reward credit card is general terms that can help you earn cash when you purchase using your credit card.

Reward credit cards can be classified further into various other categories such as cashback, points, and air miles.

Reward Points: The point-based credit cards help you earn reward points on your spending. The customers earn a set rate on their purchases using your credit card.

Cashback: With a cashback credit card, you earn a set percentage of cash on your purchase. You earn 3 percent cash back on a purchase of Rs 100 and you would get Rs 3 in rewards.

Air Miles: Air Miles gets a points-based incentive on flight bookings. Many points and mile-based rewards cards increase your rate when you spend on air travel bookings.

How do credit card rewards work?

Rewards credit cards are those that give you points for practically every purchase you make. The reward rate offered on these credit cards is directly dependent upon the annual fee charged by banks.

The cardholders can use their reward points to redeem hotel and flight bookings. You can also redeem the accumulated reward points against statement credit. In addition to this, the rewards can also be redeemed by visiting your favorite merchant store.

However, you must realize that earning more reward points does not always imply that you shall receive more benefits.

For example, a credit card will reward you with 3 reward points for every Rs.100 spent, where 1 reward point is worth Rs. 0.5. This card gives you a 2.5 percent monetary value back on your purchase. Whereas, 1 reward point for every Rs 100 spent, with 1 reward point worth Rs. 1. It gets you a 3 percent value back with this card. So, in this case, the card offering 1 reward point is more beneficial than the one providing 3 reward points.

Pros and Cons of Reward Credit Card

Here are some pros and cons that you should consider when applying for a reward-based credit card in India.

Pros

• Not all reward credit cards charge a high annual fee from the customers. You can easily get a reward credit card with no annual fee in the market. IDFC First Select credit card and Flipkart Axis credit card are two credit cards that offer amazing reward rates to customers and come with zero annual fees.
• You can save a lot of money if you use your credit card wisely and strategically. Most credit cards offer bonus rewards if you spend based upon a particular category.
• These rewards accumulated using your credit card can be redeemed across multiple categories. These categories include travel bookings, statement credits, online shopping credits, gift vouchers, and much more.

Cons

• You must redeem your reward points to derive benefit and therefore, you shall be required to assess various categories to evaluate which category offers you maximum benefit.
• There is no point in having a reward credit card where the redemption fee is more than the value of reward points.
• The reward points accumulated with your credit card expire after a certain period.

Should You Apply For Reward Credit Card?

Opting for a reward credit card would be the right option if it offers you several offers and discounts that can help you save a lot of money on your purchases. Most reward credit cards are affordable and allow you to save a lot on your day-to-day transactions.

You should always keep in mind your spending habits when choosing a reward credit card for yourself. If you enjoy shopping, use a card that offers the highest reward rate for shopping, and if you enjoy traveling apply for a credit card that rewards you on your travels and so on.

Furthermore, to get the most value out of your card ensure that the reward redemption charge does not exceed the value of the reward points you are redeeming and that you redeem your points before they expire.

Bottomline

Reward credit cards offer several incentives and benefits to the customers when used sensibly. One key feature is that everyone can have a rewards credit card because all basic and lifetime free credit cards offer reward points to their consumers.

Keep in mind to request the redemption of your reward points, which are not immediately converted to cash. It can be done through internet banking or your card issuer’s rewards system. For redemption against different categories, a credit card can provide different values of reward points. As a result, make sure to choose a card that offers the best value based upon your needs and requirements.